Fleet Financial Begins Efficiency Study

Fleet Financial Launches Study Of Efficiency

July 29, 1993|By JOANNE JOHNSON; Courant Staff Writer

The parent of Hartford-based Fleet Bank said Wednesday it has launched a sweeping efficiency study that analysts predict could result in the trimming of 2,700 jobs, or 10 percent of the company's total work force.

Fleet Financial Group said the move is designed to cut costs and boost revenues during the next two years as it strengthens the company's banking operations. Fleet is one of many New England banks that have been streamlining operations in the wake of heavy losses tied to loans that faltered with the region's economy.

Fleet acknowledged Wednesday it expects to make job cuts throughout the company as part of the program, but said it will not be able to specify the number of positions that would be affected until early next year.

Analysts said they believe Fleet, traditionally known as a banking company with a tight control on expenses, will make staff reduction a priority.

"I would think their target would be to cut staff by about 10 percent to reduce overhead to give their strategic growth plan strength moving ahead," said James E. Moynihan Jr., an analyst with Advest Inc. in Boston.

Kevin Timmons, an analyst with First Albany Corp. in Albany, N.Y., noted that Fleet is one of many banks that have been assessing staffing levels.

"They're coming off a period where they've turned around the loan losses but revenues are still more or less flat so they're looking for new ways to make gains," Timmons said.

"In the banking world, these days, that means looking at jobs," he said.

Fleet said the efficiency study is being conducted by Tandon Capital Associates, a New York-based advisory firm that specializes in helping banks develop cost-control plans.

The program initially will concentrate on Fleet's seven banking subsidiaries and its financial service divisions in New York and New England, Fleet said.

Employees will be asked to make recommendations on efficiency measures, Fleet said, and recommendations will be submitted to an executive steering committee.

Fleet, New England's largest banking company with $45 billion in assets, said it has not specified the divisions in which it would be likely to eliminate jobs as part of the efficiency program.

"Clearly, some positions will be eliminated in all levels of the company," said Terrence Murray, Fleet's chairman and chief executive officer. "But we will not know what the positions are until early 1994 when the program is completed."

Eugene McQuade, Fleet's chief financial officer, said the company does not plan to aim at specific divisions, but plans instead to review its entire operation.

McQuade said individual positions might be cut in some areas, although entire divisions where the company finds overlapping might be eliminated.

Analysts said support staff, trust divisions and back-office operations, such as check processing and technology, probably would be among the areas that Fleet would consider scaling back.

Moynihan noted Fleet increased its staffing levels by about 50 percent since acquiring the failed Connecticut Bank and Trust Co. and two sister banks that were owned by Bank of New England Corp. in 1991.

"There are some redundancies and they're going to try to cut back on some of that," Moynihan said.

Fleet Financial's staff total has risen to 27,000 workers, from 18,100 at the time of acquiring the BNE subsidiaries, said Meg Pier, a Fleet spokeswoman. Fleet Bank of Hartford, Connecticut's second-largest bank, saw its staff total grow to 3,300, from 770 employees, over the same time, Pier said.

McQuade said the company expects some of the job cuts could be accomplished through attrition and said Fleet will try to place elsewhere in the company any workers whose jobs are targeted for elimination.

Fleet restructured its top management in March in an effort to strengthen its banking operations throughout New England. The company appointed four executive vice presidents to oversee commercial banking, consumer banking, strategic planning and financial issues.

The company posted a record second-quarter profit last week of $119 million, or 72 cents a share, in a 68 percent jump over its year-ago earnings of $71 million, or 45 cents a share.

Although Fleet has gained control of its problem loans, Murray said the company has continued to assess its business strategy in the recession in hopes of fueling earnings when the economy recovers.

"In the expected absence of near-term growth, and before the economy heats up, now is an ideal time to restructure the work we do and the way we do it while also positioning the company for future growth," Murray said.

McQuade said Fleet has not projected cost savings to be accomplished as a result of the program, but believes the company could increase earnings by $125 million a year after taxes.

McQuade said the program is designed to reduce Fleet's efficiency ratio, or the ratio of its overhead expenses to assets, from 67 percent to less than 60 percent in the next two years -DE Updated: YY93 MM07 DD30